From April this year, cryptocurrency gains will be taxed at 30% – which is the highest tax bracket, and the same rate as lottery winnings. This would apply to all “virtual digital assets,” right from Bitcoin to NFT and related earnings. By contrast, the tax rate on stock trading can range from zero (if filed as business income based on tax slab) to 15% (if filed as short-term capital gain).For example, if an investor purchases a cryptocurrency for ₹ 10,000 and sells it for ₹ 15,000, making a profit of ₹ 5,000, they must pay a 30 per cent tax of ₹ 1,500.The Union Budget 2022-23 had proposed a 30 per cent tax on cryptocurrency assets. A 1 per cent tax deducted at source (TDS) on virtual currency contributions exceeding ₹ 10,000 per year was also recommended.Cryptocurrency investors, however, will need to be aware of a few regulations in order to stay on the right side of the law in the 2022-23 fiscal.If an investor is in loss overall with no earnings, there will be no tax to pay after accounting for all cryptocurrency transactions that have been done for the year.Similarly, investors won't be taxed if they have purchased a crypto asset that has considerably increased in value but are yet to sell it. Till they sell it and make a profit, their gains will not be taxed.
Losses incurred from one kind of VDA cannot be set off against the gains from any transaction involving another VDA while computing tax. This implies that investors will have to pay a 30 per cent tax for every gain they make and losses are not deductible from the final taxation amount if different tokens are traded. So, when you earn a profit on one token but lose on the other, you are still obligated to pay a tax of 30 per cent on the profited token.Persons who earn all or most of their income from crypto assets, can show their earnings as business income. However, no business expense deductions will be allowed upon crypto earnings, making this route unattractive. Avoiding the 30% crypto tax, and showing crypto profits as capital gains which is taxed at upto 20% plus surcharge, will not be allowed either. As for cryptocurrency mining, the government is mulling over whether to tax the activity as a goods or service, to bring it into the fold of GST. The government also wants to make crypto trade on foreign crypto exchanges subject to GST.